Cove
Page i
Case Studies
in Finance
Managing fo
Corporate Value
Creation
Eighth Edition
Robert F. Brune
Kenneth M. Eades
Michael J. Schill
Page ii
CASE STUDIES IN FINANCE: MANAGING FOR CORPORATE VALUE CREATIONS, EIGHTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY XXXXXXXXXXCopyright © 2018 by McGraw-Hill Education. All rights reserved.
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Li
ary of Congress Cataloging-in-Publication Data
Names: Bruner, Robert F., 1949-author. | Eades, Kenneth M., author. | Schill, Michael J., author.
Title: Case studies in finance: managing for corporate value creation / Robert F. Bruner, Kenneth M. Eades,
Michael J. Schill.
Description: Eighth Edition. | Dubuque, IA : McGraw-Hill Education, [2018] | Series: The McGraw-Hill/Irwin series in finance, insurance, and real
estate | Revised edition of the authors’ Case studies in finance, [2014]
Identifiers: LCCN XXXXXXXXXX| ISBN XXXXXXXXXXalk. paper) | ISBN XXXXXXXXXXalk. paper)
Subjects: LCSH: Corporations—Finance—Case studies. | International business enterprises—
Finance—Case studies.
Classification: LCC HG XXXXXXXXXXB78 2017 | DDC 658.15—dc23 LC record available
at https:
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authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites.
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Page iii
The McGraw-Hill Education Series in Finance, Insurance, and Real Estate
FINANCIAL MANAGEMENT
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Foundations of Financial Management
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Brealey, Myers, and Allen
Principles of Corporate Finance
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Principles of Corporate Finance, Concise
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Fundamentals of Corporate Finance
Ninth Edition
Brooks
FinGame Online 5.0
Bruner, Eades, and Schill
Case Studies in Finance: Managing for Corporate Value Creation
Eighth Edition
Cornett, Adair, and Nofsinge
Finance: Applications and Theory
Fourth Edition
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M: Finance
Fourth Edition
DeMello
Cases in Finance
Third Edition
Grinblatt (editor)
Stephen A. Ross, Mentor: Influence through Generations
Grinblatt and Titman
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Analysis for Financial Management
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Page iv
Corporate Finance
Eleventh Edition
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Corporate Finance: Core Principles and Applications
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Behavioral Corporate Finance: Decisions that Create Value
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INTERNATIONAL FINANCE
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Page v
Dedication
In dedication to
our wives
Ba
ara M. Brune
Kathy N. Eades
And to the memory of
Mary Ann H. Schill
and to our children
Page vii
Page vi
About the Authors
Robert F. Bruner is University Professor, Distinguished Professor of Business Administration and Charles C.
A
ott Professor of Business Administration and Dean Emeritus of the Darden Graduate School of Business
Administration at the University of Virginia. He has taught and written in various areas, including corporate
finance, mergers and acquisitions, investing in emerging markets, innovation, and technology transfer. In addition
to Case Studies in Finance, his books include Finance Interactive, multimedia tutorial software in Finance
(Irwin/McGraw-Hill 1997), The Portable MBA (Wiley 2003), Applied Mergers and Acquisitions, (Wiley,
2004), Deals from Hell: M&A Lessons that Rise Above the Ashes (Wiley, 2005) and The Panic of 1907 (Wiley,
2007). He has been recognized in the United States and Europe for his teaching and case writing. BusinessWeek
magazine cited him as one of the “masters of the MBA classroom.” He is the author or co-author of over 400
case studies and notes. His research has been published in journals such as Financial Management, Journal of
Accounting and Economics, Journal of Applied Corporate Finance, Journal of Financial Economics, Journal
of Financial and Quantitative Analysis, and Journal of Money, Credit, and Banking. Industrial corporations,
financial institutions, and government agencies have retained him for counsel and training. He has been on the
faculty of the Darden School since 1982, and has been a visiting professor at Harvard, Columbia, INSEAD, and
IESE. Formerly he was a loan officer and investment analyst for First Chicago Corporation. He holds the B.A.
degree from Yale University and the M.B.A. and D.B.A. degrees from Harvard University. Copies of his papers
and essays may be obtained from his website,
http:
www.darden.virginia.edu/we
Faculty-Research/Directory/Full-time/Robert-F-Brune
He may be
eached via email at
une
@virginia.edu.
Kenneth M. Eades is Professor of Business Administration and Area Coordinator of the Finance Department of
the Darden Graduate School of Business Administration at the University of Virginia. He has taught a variety of
corporate finance topics including: capital structure, dividend policy, risk management, capital investments and
firm valuation. His research interests are in the area of corporate finance where he has published articles in The
Journal of Finance, Journal of Financial Economics, Journal of Financial and Quantitative Analysis, and
Financial Management. In addition to Case Studies in Finance, his books include The Portable MBA (Wiley
2010) Finance Interactive, a multimedia tutorial software in Finance (Irwin/McGraw-Hill 1997) and Case
Studies in Financial Decision Making (Dryden Press, XXXXXXXXXXHe has authored or co-authored over 70 case
studies as well as a web-based, interactive tutorial on the pricing of financial derivatives. He has received the
Wachovia Award for Excellence in Teaching Materials and the Wachovia Award for Excellence in Research. Mr.
Eades is active in executive education programs at the Darden School and has served as a consultant to a numbe
of corporations and institutions; including many commercial banks and investment banks; Fortune 500 companies
and the Internal Revenue Service. Prior to joining Darden in 1988, Professor Eades was a member of
the faculties at The University of Michigan and the Kellogg School of Management at Northwestern
University. He has a B.S. from the University of Kentucky and Ph.D. from Purdue University. His website is
http:
www.darden.virginia.edu/we
Faculty-Research/Directory/Full-time/Robert-F-Brune
mailto:
une
@virginia.edu
http:
www.darden.virginia.edu/we
Faculty-Research/Directory/Full-time/Kenneth-M-Eades/ and he may be
eached via email at XXXXXXXXXX.
Michael J. Schill is Professor of Business Administration of the Darden Graduate School of Business
Administration at the University of Virginia where he teaches corporate finance and investments. His research
spans empirical questions in corporate finance, investments, and international finance. He is the author of
numerous articles that have been published in leading finance journals such as Journal of Business, Journal of
Finance, Journal of Financial Economics, and Review of Financial Studies, and cited by major media outlets
such as The Wall Street Journal. He has been on the faculty of the Darden School since 2001 and was previously
with the University of California, Riverside, as well as a visiting professor at Cam
idge and Melbourne. He is
the cu
ent course head for Darden’s core MBA finance course. He is the author or co-author of over 40 cases
and technical notes, as well as a financial market simulation entitled Bond Trader. Prior to his doctoral work, he
was a consultant with Marakon Associates in Stamford and London. He received a B.S. degree from Brigham
Young University, an M.B.A. from INSEAD, and a Ph.D. from University of Washington. More details are
available from his website,
http:
www.darden.virginia.edu/we
Faculty-Research/Directory/Full-time/Michael-J-Schill/ He may be
eached via email at XXXXXXXXXX.
http:
www.darden.virginia.edu/we
Faculty-Research/Directory/Full-time/Kenneth-M-Eades
mailto: XXXXXXXXXX
http:
www.darden.virginia.edu/we
Faculty-Research/Directory/Full-time/Michael-J-Schill
mailto: XXXXXXXXXX
Page viii
Contents
Dedication v
About the Authors vi
Contents viii
Foreword xi
Preface xii
Note to the Student: How To Study and Discuss Cases xxiii
Ethics in Finance xxx
1 Setting Some Themes
1 Wa
en E. Buffett, 2015 To think like an investor 3
2 The Battle for Value, 2016: FedEx Corp. vs. United Parcel Service, Inc. Value creation and economic
profit 23
3 La
y Puglia and the T. Rowe Price Blue Chip Growth Fund Market efficiency 43
4 Genzyme and Relational Investors: Science and Business Collide? Value creation, business strategy a
nd activist investors 63
2 Financial Analysis and Forecasting
5 Business Performance Evaluation: Approaches for Thoughtful Forecasting Financial forecasting princ
iples 89
6 The Financial Detective, 2016 Financial ratio analysis 107
7 Whole Foods Market: The Deutsche Bank Report Financial performance forecasting 113
8 Horniman Horticulture Financial forecasting and bank financing 127
9 Guna Fi
es, Ltd. Forecasting seasonal financing needs 133
3 Estimating the Cost of Capital
10 “Best Practices” in Estimating the Cost Estimating the cost of capital 145
of Capital: An Update
11 Roche Holdings AG: Funding the Genentech Acquisition Cost of debt capital 173
12